Sat, July 07, 2012
World

World Bank earmarks 750 mln USD to finance projects in Kenya

2012-07-07 20:22:10 GMT2012-07-08 04:22:10(Beijing Time)  Xinhua English

by Ronald Njoroge and David Musyoka

NAIROBI, July 7 (Xinhua) -- The World Bank has allocated 750 million U.S. dollars to finance various projects in Kenya for the current financial year, a senior Bank official said on Saturday.

Visiting World Bank Vice President for Africa Region Makhtar Diop told journalist in Nairobi that the figure is in addition to the current World Bank's portfolio of 3.3 billion dollars.

"The World Bank board has approved 750 million dollars for Kenya mostly for infrastructure projects for the next financial year," Diop told journalists in Nairobi.

According to the Bank, approximately 7.4 billion dollars has been allocated to the entire Africa region for the next financial year which represents over 50 percent of funds under the International Development Assistance (IDA) window.

He said that the main challenges for Africa are lack of access to cheap energy and low agricultural productivity.

That is why it was supporting the establishment of a regional power pool in the continent in order to ensure that electricity moves from areas of surplus to those with deficits, Diop, the Bank's former Kenya Country Director said.

The World Bank said it will focus on key reforms in energy sector, roads construction and implementation of the new constitution as well as reforms in the justice system as it deepens its relations with Kenya.

In May, Diop said he will concentrate on key reforms in the East African nation, noting that concerns on governance issues around past projects were the reason for the extra scrutiny on the East African nation's current donor requests.

He however promised during a meeting with Vice-president Kalonzo Musyoka in Washington on May 22 to ensure that Kenya gets support to aid the implementation of the new constitution, strengthening of institutions road and the energy sectors.

On Saturday, he said that given the fact that Kenya is the largest economy in the East African Community bloc, its economic growth will spill over to the rest of the member states.

Diop added that Kenya is on a right economic trajectory and the bank has put in place plans to accelerate the country's efforts to transit from a low to middle income nation.

"Our prediction is that Kenya will achieve middle income status by the year 2016," he said. World Bank statistics indicate that middle income status represents an income per capita of 1,000 dollars.

The VP said that good macro-economic policies and high commodities prices have led the Africa region to average 5 percent economic growth in past four years.

He noted that World Bank will not only provide financial assistance but also technical support. "As a result over the past few years the bank's specialists have developed over 200 analytical pieces on the economy of Africa," he said.

He praised the continent's move to diversify its sources of foreign direct investment. "Apart from the traditional investors in Europe and the U.S., other emerging nations such as China and Brazil are also showing great interest in Africa which will make the continent more resilient to external shocks," he said.

He said that the bank is also working in some parts of Somalia where peace and security conditions have been stabilized but it hopes to scale up interventions once the nations returns to normalcy.

World Bank Kenya Country Director Johannes Zutt said the country is still vulnerable to drought conditions which will impact food insecurity.

He blamed that the low level of agricultural productivity is linked to poor infrastructure. Zutt said that the country's energy mix is one of the cleanest in the region due to reliance on hydro generated power and use of geothermal sources.

Kenya decisions to maintain prudent tax policies, he said, has resulted in tax collections equivalent to 22 percent of the gross domestic product (GDP).

"This is one of the reasons the country has maintained a sustainable debt level of under 46 percent of GDP but the funds should be targeted towards reducing the level of poverty in the country," Zutt said.

He said that so far there are no indications that the level of private sector investment is slowing down due upcoming elections. "The leadership has shown political will to ensure peaceful elections in order to avoid disruption of economic growth," he said.

Zutt added that the current Euro zone crisis which could reduce demand for African commodities is an opportunity for the continent to increase intra-Africa trade.

"Africa should take this opportunity to reduce bottlenecks such as non tariff barriers in order to allow movements of goods and boost trade amongst themselves," he said.

He said that the rest of Africa could borrow lessons from Kenya constitution which contains elements aimed at strengthening institutions critical to good governance.

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